Thursday, May 06, 2010

7 Ways Moms Can Boost Their Financial Security

As Mother’s Day quickly approaches, I thought it’d be a great time to share this article from Klipinger.com with the fantastic moms and women out there. Take your finances into your own hands and take the advice.

1. Schedule a money date with your spouse and talk things out. Many women want their spouses to talk about money issues more, so try starting that conversation yourself! Write out your financial goals together and see whether or not you’re on the same page.

2. If you aren’t saving for retirement already, start. Small amounts set aside now will compound and grow over the years. The earlier you start, the more time your savings have to grow. If you are working, sign up for your company’s retirement plan. Aim to contribute at least enough to qualify for your employer’s match. It’s free money! In 2010 you can contribute up to $16,500 to a 401(k) or other employer-based retirement account, or $22,000 if you’ll be 50 or older by year’s end.

Never cash out your company plan if you switch jobs. Instead, roll the money over to an IRA or new employer plan so that you continue saving and do not get hit with tax penalties.

3. No company or employer plan? Then set up your own retirement account, such as an IRA. If you’re a stay-at-home mom, you can have an IRA so long as your spouse is employed. In 2010 he can contribute up to $5,000 to an account for you ($6,000 if you’re 50 or older) in addition to his own $5,000 contributions. This doubles the tax breaks to you as a couple!

4. Life insurance is always advised. Once you have children it should become a priority so your children do not suffer financially if you’re not around any longer. The rule of thumb? Coverage should equal eight to ten times your annual household income, including any benefits covered by your employer. Buying term life insurance is said to keep things simple and inexpensive. Several hundred thousand dollars’ worth is just a few hundred dollars per year.

Already have life insurance? Remember, you’ll need to re-evaluate your coverage periodically to ensure it still meets your current life circumstances. For instance, you may need more coverage if you have another child but less when the children are grown and out of the house.

5. Write a will. When you don’t have a will, your state’s one-size-fits-all estate plan kicks in and you might not agree with it. The state will also choose the guardian of your children. With a will, you can make these decisions, divide your property and even design trusts for your children for specific purposes. Review your will after the birth of additional children.

6. Make sure you specify a guardian. If you don’t choose a guardian for your children officially, then the choice you informally made with a friend or family member won’t stand up legally. Avoid any hassle or expensive court battle by naming a guardian in your will.

7. Review your beneficiary designations on insurance policies, IRAs, 401(k)s, and other retirement plans such as pension and profit sharing plans at various life stages. The assets in these accounts go directly to whomever you have named as a beneficiary; these are not covered by your will. If you handle these issues now, you won’t have devastating consequences if something was to happen.